Tuesday, July 15, 2014

Fracking Growth

This paper estimates the effect of the shale oil and gas boom in the United States on local economic outcomes. The main source of exogenous variation to be explored is the location of previously unexplored shale deposits [, which is used to] to estimate the localised effects from resource extraction. Every oil- and gas sector job creates about 2.17 other jobs. Personal incomes increase by 8% in counties with at least one unconventional oil or gas well. The resource boom translates into an overall increase in employment by between 500,000 - 600,000 jobs. A key observation is that, despite rising labour costs, there is no Dutch disease contraction in the tradable goods sector, while the non-tradable goods sector contracts. [He reconciles] this finding by providing evidence that the resource boom may give rise to local comparative advantage, through locally lower energy cost. This allows a clean separation of the energy price effect distinct from the local resource extraction effects.